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We mentioned last week that a couple of bullish strategists were sounding a tad nervous these days, given the astounding gains by the S&P 500 this year without any real improvement in the economy. The result, they said, was rising speculation that was tempering their enthusiasm for stocks in the near term.

One of those strategists, Bank of America's Michael Hartnett, weighed in with an update on Thursday, saying that he's watching three areas for evidence that "liquidity excesses are becoming more concerning."

1. Breadth: Mr. Hartnett argues that bubbles occur when an index is led by a "select few rather than the majority." Don't worry, Twitter Inc. isn't in the S&P 500 yet. As for the index, all 10 subindexes are up in the third quarter, along with 76 per cent of individual stocks.

2. Credit: Stocks and corporate bond prices have been moving together in recent years, and that's good. If stocks rise without support from credit markets, Mr. Hartnett warns, get worried.

3. Dollar. That would be the U.S. dollar. It should rise "sharply" if the U.S. economy gains real traction and more money flows out of bonds and into stocks. But the outlook isn't good if it takes a surprising dip.

So far, Mr. Hartnett isn't sounding any alarms. But he isn't upbeat on the underlying economy: "Until a virtuous cycle emerges that starts with stronger housing and flows to stronger bank lending and stronger small business hiring, we believe growth in the U.S., Japan, and Europe will struggle to expand at a pace that does not require central bank liquidity injections and zero interest rates."

Investors have loved central bank stimulus so far, but the longer it goes on, the worse that speculation could get.

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